South Korea’s Won Surges as Central Bank Cuts Benchmark Interest Rate

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South Korea’s Won Surges as Central Bank Cuts Benchmark Interest RateSouth Korean won grew by the fastest pace since April after the central bank reduced target interest rate for the first time since May 2013 as it seeks to boost economic growth. The Bank of Korea reduced the 7-day repurchase rate from 2.5 percent to 2.25 percent.

The won advanced 0.8 percent to trade at 1,020.93 per dollar in Seoul close, the fastest advance since April 9. It had earlier touched 1,020.72, its highest level since July 15. The won’s one-month implied volatility, which measures the expected swings in the exchange rate used to assign price to options, fell 65 basis points on Thursday to 5.86 percent.

The won has gained 1.5 percent so far this week. South Korean financial markets will be closed on Friday for a national holiday.

“The BOK’s cut erased uncertainty in the currency market and investors are taking this as a chance to sell dollars,” Jude Noh, a chief foreign-exchange trader at Suhyup Bank in Seoul, told Bloomberg News.

The yield on South Korea’s 2.75 percent government bonds that mature in June 2017 accelerated 0.02 percentage point or two basis points, to 2.54 percent.

Meanwhile, the Philippine peso advanced by the fastest pace since May on bets that an increase in borrowing costs will spur demand for it. Weak U.S. retail sales data also fuelled optimism the Federal Reserve may retain the low interest rates for some time, making emerging-market assets attractive.

The peso rallied 0.7 percent to trade at 43.67 per dollar at the close of trading in Manila, the biggest gain since May 9. The peso’s one-month implied volatility fell 0.15 percentage point or 15 basis points, to 5.28 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com